Sun's Schwartz: Lose-Win Proposition

The Santa Clara, Calif.-based manufacturer may give away hardware or software--or at least sacrifice its margins--to make more money with the rest of its product and services lineup, Schwartz told about 180 solution providers last week in Carlsbad, Calif., at Net@Work, the annual conference held by the MOCA division of Arrow Electronics.

"You'll increasingly see us do things to make it painful [for competitors]," Schwartz said. "If we do, we will make sure the value added by Solaris way more than offsets investments into hardware. We will help you make money."

Schwartz used Verizon as an example of a company that has successfully lost money, up to 25 points of margin, on phones in order to win annual subscription contracts.

Sun's strategy would place more pressure on competing hardware platforms and also on Linux vendors such as Red Hat, Schwartz said.

"If we give away the hardware to get the OS deal or give away the OS to get the hardware deal, they can't play," he said. "If you're Red Hat, how do you respond? I would think that would be an uncomfortable conversation with Michael Dell. 'Can't you give us hardware for free?' 'No.' "

It's a concept Sun can explore because its reputation is improving, Schwartz said. It has the right products to offer, and "free" Linux isn't free anymore, he said. Solution providers said they would support Sun as long they can still make money.

"It's an intriguing way to do business. [Hewlett-Packard] gives away the printers and cleans up on the cartridges," said Bob Helmes, an account executive at GovStor, a solution provider in West Sacramento, Calif. "I'm totally confident that Sun will still find margin for channel partners."